All Forum Posts by: Chris Piper

@Tyler Smiarowski I have a Standard Purchase and Sales agreement uploaded on here. Click on the "Resources" tab near the top of this page, then click on "FilePlace", then "Contracts" and mine is the second one. It is just a standard contract, so you may want to have your real estate agent or lawyer review it to make any changes as needed pertaining to your particular state.

Every deal is different, and each contingency can be as short or long as both parties are willing to agree to. Inspection periods are typically 10 days as an example.

A typical contract is structured with you as the buyer, putting a property under contract, the seller is the seller. You get it under contract, you find a buyer, you do a double close where you buy the property on the scheduled closing date, and then the end buyer you are selling to buys from you the same day. If you are using a double close, check first with your title or escrow company to make sure they handle double-closes. Also, make sure you have "wet funds" to actually purchase the property on the 1st closing. You use "transactional funding" to purchase your property. 99% of transactional funding companies have no credit or income requirements. Most if not all of them will require that you have a buyer in place with a signed contract from them prior to funding your deal. Good luck.

The more units in a property, the better cost ratio it will have to a potential buyer/investor. If you have 2 units renting at $800/mo equalling $1,600 a month, but the mortgage and taxes are $1,400/mo, then you only have $200 a month in positive cash flow. If you have 4 units renting at $800/mo and the mortgage and taxes are $1,400/mo, now you have $1,800 in positive cash flow. This is much better and more appealing to investors.

Just my 2 cents, but if a house is out of place or too nice for the area it's in, then it will likely be a hard sell if you are looking to wholesale or rehab. It might work well if you are going to rent it, but I can't comment on that since I am not a landlord. Either way, at some point you will need to sell it, and it will be difficult to move unless you are going to do a land contract or lease option with the renter.

In the example above in case you were wondering, the ARV X 70% means you will be selling to investors for 70 cents on the dollar minus repairs to make it a good deal for them.

In the example above, you would price your property at $45,000, and you could accept no less than $42,000. These are the prices you sell to investors at. You have:

$70,000 (70% of the $100,000 ARV)

-$25,000 (Repairs)

= $45,000 Your Asking Price

- $3,000 (Counter Offer Margin 3% of ARV)

Sell price of $42,000-$45,000

Sorry, here is the formula again. I pasted some cells from Excel before and it didn't show up right.

EXAMPLE DEAL

Asking Price:

ARV $100,000

*70%= $70,000

-Repairs of $25,000= $45,000

-Closing Costs/Points for transactional funding $3,000= $42,000

-Profit(10% of ARV $10,000)= $32,000

-Counter Offer Margin(3% of ARV $3,000)= $29,000

MAX PURCHASE PRICE= $29,000

*80%(Initial Offer)= $23,200

If you get countered by the bank or seller, anything between the initial offer price and your max purchase price is acceptable to make a good deal for you. Never buy above your max purchase price, no matter how much you want a property.

@Brandon Turner has it right. Here is what I would recommend:

1. Have your real estate agent run a CMA(comparative market analysis) for you. That will give you multiple comps to compare your property against. Make sure the comps all match your property's bedrooms and bathrooms, and make sure they are within 200sf. of your property, and within 1 mile max from the location of your property.

2. Yes you can get a huge discount from a bank, but each bank is different, and no one understands how or why banks do things they way they do. In order to know how much to offer, you need a formula to plug some numbers into. This will tell you what to offer every time. I will give you my formula, but here are two things that I have found to be true: If you aren't embarrassed by your offer, then you paid too much. Never get attached to a property. There are always more deals out there. Also, keep in mind that banks HAVE to get rid of their inventory because it directly affects how much they have to lend. Banks try to get rid of inventory more aggressively at the end of the month, end of the quarter(End of March, June, September, and Dcember), and the end of the year.

EXAMPLE DEAL

Now I take my Max Purchase Price and multiply by 80% and that is my initial offer. = $23,200

3. When you're just starting out, I would have 2 or 3 contractors meet you at the house your looking at and give you estimates. Then you will know for sure what the repairs will be so you can tell your cash buyers when they ask, and you'll know they are accurate.

4. Make sure you have an exit strategy and make sure you run the numbers and that they are accurate before making any offers. If you decide to wholesale this deal, then that is your exit strategy. Also, having a back-up plan is a great idea. If your exit strategy is to wholesale a particular house, then your back-up plan might be to hold and rent, or rehab and sell retail for full value. Just something to keep in mind. I hope this helps. Good luck.

@Perry Apawu I wouldn't do away with bandit signs. Those are probably the single biggest tool to build a cash buyer's list and a list of motivated sellers. Like @Aaron Mazzrillo said, even if it is only a small amount every month, since I know they disappear sometimes, it will still get you a good amount of calls if properly written and placed in prime locations. What I also did was get car magnet signs that read just like my bandit signs. Free advertising for you 24/7. I think I paid like $80-$90 for a pair of 18" X 24" car magnets. I would recommend the standard 12" X 24" probably since my car has molding that protrudes from the door, but if you have a flat door, you could use the big ones.

Driving for dollars is another cheap way to find properties. Also, you could get a bird dog, and give them a limit on how many deals you need them to bring you a month if you are paying them up-front, or you could tell them that you pay a flat fee if you close on a house, then pay them after you close and get paid.

Free online marketing is another way to go. Postlets.com is good for advertising a property for free. There are a lot of ways. Good luck.

Everyone on here so far is correct. I guess I would unfortunately consider myself an expert in this area, since I have lost several deposits. I would try to keep your earnest money as low as possible when you make offers.

How much earnest money to put up: If it's an individual who owns a property put up no more than $100, Bank/REO $500-$1,000, HUD homes are $100, and Fannie Mae is 10% of the purchase price.

Basically, you will always lose your earnest money if you cannot close on your property. Usually if a property is owned by a bank, you will not be allowed to assign your contract. Each state varies so you may want to check with an agent.

These are the main causes of not being able to close:

1. You paid too much for the property

2. Your repairs are way off

3. Your comps are too high

4. You don't have a big enough or targeted enough cash buyer's list

I heard once that when you pull comps, look for a recent sale that is much lower than the rest. You will know that that low purchase price was by an investor, and if you can price your property below that price, that investors should be willing to buy at that price. It makes sense. Last piece of advice, make sure you know what your exit strategy is before you make an offer. For example, if you decide you are going to wholesale a property, make sure you know that that is your exit strategy, and always have a back-up plan. For example, if you exit strategy is to wholesale a property, and you will be using transactional funding for a double close, you might have a back-up plan of closing and rehabbing the property using hard money or private money and the selling it retail for full price. Trust me, a back-up plan will save you some times. Good luck, and try to buy at the right price, quote accurate repair costs, get accurate comps, and market properly so you won't have any problems selling your properties.

Welcome Kevin. Good luck in your RE investing career.

Like the old saying goes, "If it ain't broke, don't fix it." As long as it's functioning proper;y, I would replace it.